Federal Reserve
Assessing the Future

Federal Reserve's new message should allow for broader flexibility in future decisions.

November 14, 2019
Craig Imamura

Key Takeaways

  • As widely expected, the Federal Open Market Committee (FOMC) on Oct. 30, 2019 cut the federal funds target-rate range by a quarter point to 1.50%–1.75%, the third rate cut this year.
  • Federal Reserve (Fed) officials made minor changes to their September statement, with markets focused on the Fed altering language from “act as appropriate” to “assesses the appropriate path” as it relates to future rate decisions.
  • For the first time in six years, the Fed’s rate-setting committee held an unscheduled meeting and announced a plan to:
    - Buy short-term U.S. Treasury debt, starting at $60 billion per month and continuing into the second quarter of 2020.
    - Conduct term and overnight repurchase-agreement operations through at least January 2020.
  • Expectations for future Fed rate cuts, according to Bloomberg, currently stand at*:
    - December: 24.5%
    - January: 41.9%
    - March: 51.7%


Fed officials met market expectations on Oct. 30, 2019 by lowering the benchmark rate by 25 basis points. Federal Reserve Chair Jerome Powell said the “current stance of monetary policy is likely to remain appropriate,” but added the Committee would react through a “material reassessment” should incoming information not align with the Fed’s economic outlook.

Equities pared losses during Chair Powell’s press conference, as comments seemed to emphasize an accommodative and balanced stance by the Fed. Powell signaled a willingness to act as needed because the Committee’s outlook still contained market uncertainties. He stated the Fed would rely on an increased level of incoming data rather than adjusting rates lower to help continue economic growth. This stance was highlighted by the removal of language in the September 18, 2019, statement that said the Committee would “act as appropriate to sustain the expansion.”

Our Takeaway

It appears the Fed put may be on hold for the time being. Powell reiterated the Fed is working to sustain a favorable economy, and principal risks are moving in a positive direction. The Committee emphasized its stance will continue to be adjusted based on the evolving risk picture. Two Committee members, Kansas City Fed President Esther George and

Boston Fed President Eric Rosengren, dissented, arguing precautionary easing wasn’t needed in light of buoyant domestic demand.

The modest adjustments of the Fed’s message should allow for broader flexibility in future decisions as the Committee assesses changing economic conditions. The Fed balanced its relatively stable economic outlook with the various risks it saw to the U.S. and global economies. Fed watchers will note that Vice Chair Richard Clarida had foreshadowed the Fed’s current stance in an October speech, saying, “Looking ahead, monetary policy is not on a preset course, and the Committee will proceed on a meeting-by-meeting basis to assess the economic outlook, as well as the risks to the outlook, and it will act as appropriate to sustain growth, a strong labor market, and a return of inflation to our symmetric two percent objective.”

In the end, most investors seemed comforted. On the day of the Fed’s announcement, the Dow Jones Industrial Average® Index and the S&P 500® index ended higher, while the 10-year Treasury finished at 1.78%. With the next meeting scheduled for December 16–17, we will have to wait and see if the Fed delivers a present for the markets in time for the holidays.

Informational commentary from Pacific Asset Management, sub-adviser for Pacific Global Focused High Yield ETF (NYSE: FJNK).

*Bloomberg Finance L.P., 10/30/19


One basis point is equal to 0.01%.

The Dow Jones Industrial Average (DJIA) is an index that tracks the share price of the top 30 large, publicly owned U.S. companies, which is often used as an indicator of the overall condition of the U.S. stock market.

The S&P 500 index is a market capitalization-weighted index of 500 widely held stocks often used as a proxy for the U.S. stock market.

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